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Ask Eli: Does Virginia, Washington DC, or Maryland Have The Most Favorable Taxes?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I recently got a job in the D.C. Metro area and will be moving to the area next year. I am open to living in Northern Virginia, Washington D.C., or Maryland and want to know which jurisdiction offers the most favorable taxation.

Answer: Congratulations on your new job (Amazon HQ2?)! There must be a lot going on in your mind right now like whether you’re still young enough to offer your friends pizza and beer to help you move.

For years I’ve looked for a good resource to send clients in response to this question and couldn’t ever find it, so I reached out to my CPA, Klausner & Company located in Arlington, Virginia, who I highly recommend, to come up with a detailed yet simple chart to compare taxation between Virginia, Maryland and Washington D.C. across different incomes.

So with that, I will turn this week’s column over to Chris Light and the tax experts at Klausner & Company, enjoy!

First thing’s first, Virginia, Washington D.C. and Maryland all have reciprocity with each other. This means that if you live in one state and work in the other, you only have to worry about paying taxes and filing a tax return in the state that you live in.

Let’s analyze the tax outlook of three different people who have just landed new jobs as employees in the D.C. Metro area:

  • Bobby’s AGI is $85,000. Bobby has a vehicle valued at $18,000 and a home valued at $450,000.
  • Sarah’s AGI is $150,000. Sarah has a vehicle valued at $35,000 and a home valued at $800,000.
  • Chris’s AGI is $300,000. Chris has a vehicle valued at $65,000 and a home valued at $1,200,000.

Important Notes

AGI, Adjusted Gross Income, is a term to describe a person’s income minus some specific deductions. Bobby, Sarah and Chris’ AGI are all based on salary earned by the end of 2018. AGI is used to determine taxable income, as seen in the ‘Math’ chart below. Taxable income determines which income tax brackets they fall in.

They are all taking the standard deduction. Virginia and Maryland property taxes vary by county and city/town, so the table below uses Arlington County rates for Virginia and the average Montgomery County rate for Maryland. Now let’s crunch some numbers:

For the full text of this column including summary of findings, how adjustments like renting and being married impact your tax position, and helpful reference tables please follow this link (don’t worry, I won’t ask for your email address, I just don’t have enough space here).

Thank you very much Klausner & Company for finally providing people with an easy to understand breakdown of taxation in the DMV. For those of you in need of CPA services for yourself or your business, I am a loyal, happy client and I can’t recommend them enough.

They provide specialize in tax services for individuals and small business and have over 40 years of experience in the Greater Washington area.

Once you’ve taken advantage of the provided tax information and would like to talk about the non-tax related questions you have about where to live, please reach out to me at [email protected]. Our team has worked with buyers from all over the country and the world to find the right neighborhood and we’re happy to help you too.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Dealing With Homes Selling Above Asking Price

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Are you seeing people use Escalation Addendums in their offers now that the supply of homes has dropped?

Answer: The use of Escalation Addendums in multiple offer situations is not new, but the frequency with which they are being used is. In the last three months over 25% of sales have been for over the asking price (another 24% have been for full ask). All-time low inventory levels + strong demand = price increases and a lot of competition from well-qualified buyers.

In the last 24 hours our team has submitted three offers on properties with multiple offers that will no doubt sell for over the asking price. In many cases, using an Escalation Addendum is the best strategy for buyers and sellers so let’s take a look at what that means.

What is an Escalation Addendum?

An Escalation Addendum provides the maximum value a buyer will pay and an escalation factor, the amount their offer is to increase over the next highest offer. Sellers may use the escalation without further approval from the buyer, but they must deliver to the buyer the entirety of the contract used to escalate the accepted offer. Escalations are based on “Net Price” meaning purchase price less any seller credits.

Understand the Risks

The obvious risk in using an Escalation is that buyers are exposing their maximum purchase price and some sellers may ask for that max, regardless of whether or not another offer allows them to get there contractually. There are strategies buyers can use to prevent a seller from doing this and, in my experience, most sellers use Escalations as they’re meant to be used.

The other not-so-obvious problem is with non-financial differences between two contracts. The Escalation Addendum says nothing about differences in settlement date, contingencies and other non-financial terms that make a material difference between contracts (e.g. no Home Inspection Contingency vs full Inspection Contingency is treated equally in the Escalation Addendum).

When to use an Escalation Addendum

Escalations are best used when there are multiple confirmed offers and the seller has set a deadline for “best-and-final” offers. It’s important for buyers to establish expectations with the seller before they include an Escalation Addendum to maximize the benefit and reduce the risks.

This is where having an experienced agent working for you can be the difference between making a smart decision and irresponsible one or securing a home and helping somebody else secure it.

Proper Communication is a Win-Win

I strongly believe that with proper communication between sellers and buyers, Escalation Addendums benefit both parties by allowing the seller to draw out the highest available price for their home and allowing buyers to confidently maximize their chance of securing a home. Improper communication leads to a lack of trust and a lack of trust will almost always earn sellers less and may keep the most motivated buyer out of the home of their dreams.

I can think of a recent example where a seller left 2% on the table by failing to communicate appropriately which compromised the trust of our client leading them to hold back on their offer terms. A lack of trust kept 2% out of the seller’s pocket and kept our client out of a home they loved.

It’s Not Always About Price

Being the winning offer amongst multiple offers isn’t always about price. Buyers need to focus on non-financial terms as well to set themselves apart and it’s important to understand how you can increase the strength of your offer without taking on excessive risk, but that’s a topic for another day.

If you’re thinking about buying or selling a home and would like to discuss the right strategies in today’s market feel free to email me at [email protected] to set-up a meeting.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: I’m Moving into a Dirty House

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: What obligations does a seller have on the condition and cleanliness of a home when it transfers ownership?

Answer: Many sellers apply The Golden Rule of treating others how you wish to be treated and convey their home in the condition they’d like to move into a home. Unfortunately, this rule isn’t a contractual obligation so let’s take a look at what the contract states and some common points of contention.

Contract Language on Property Condition

The Northern Virginia contract states that the “Seller will deliver Property free and clear of trash and debris, broom clean and in substantially the same physical condition to be determined as of [Select One] Date of Offer, Date of Home Inspection, or Other [as defined in contract].”

If you’re doing a home inspection, use the home inspection as the date of determination because there’s a documented property condition report.

All systems, finishes and fixtures convey in as-is condition as of the time period selected in the previous statement, unless otherwise noted in the contract. Electronic components/devices don’t convey, but all related mounts and hardware do (e.g. TV goes, the wall mount does not).

Your Final Walk-Thru 

The final walk-thru is your opportunity to catch any property condition issues before they become your problem. Once you sign the paperwork any leaks, holes in the wall, or faulty systems are yours to deal with.

While the contract allows you to do a walk-thru as early as seven days before settlement, I recommend doing it just before you sign the paperwork to reduce risk.

Common Points of Contention

Pre-Existing Condition — During the final walk-thru you find a hole in the wall that was previously covered up by a large piece of furniture. If the hole existed prior to the contract, the seller has no contractual obligation to address it.

If a faulty water heater leaks and causes damage in the basement, the seller must clean up the leak and repair any damage the leak caused, but likely won’t be obligated to replace the faulty water heater.

Get it? The seller’s obligations revert back to the as-is condition at the point in time stated in the contract (date of offer, date of inspection, or some other defined time), unless a separate addendum is created that provides other direction.

Clean or Dirty — Broom clean doesn’t mean “clean” in the way most buyers want to arrive to their new home, so plan to hire professional cleaners prior to moving in. On the other hand, it’s normal for sellers to leave behind paint, lawn tools and cleaning supplies.

You should confirm the buyer wants these prior to leaving them behind or you may be scrambling to clear them out at the last minute to remove “trash and debris.”

Nails and Screws — Do you have a bunch of nails and screws left in the wall after removing photos, art and shelving? Leave those in place otherwise buyers can make a case that the physical condition of the home changed due to all the new holes.

Contractual obligations are not what most of us would consider the right way of doing business. That’s why I stress maintaining a positive relationship between all parties during negotiations so that when something unexpected comes up, it’s handled with care and consideration instead of contractual force.

For those who subscribe to the business practice of brute force [ahem Roger Stone], I suggest picking up a copy of Ron Shapiro’s “The Power of Nice.”

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Arlington 2018 Real Estate Review — The Amazon Impact

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: What impact has Amazon HQ2 had on the Arlington Real Estate market so far?

Answer: For those keeping score, this is Part Four of my Four-Part series reviewing the 2018 Arlington Real Estate market and Part Two of my ongoing look at the impact Amazon is having on our market… I’m sure you care.

Over the last three weeks I looked at how the Arlington market for detached single-family homes, condos and townhouses/duplexes did in 2018. Now we’ll dig into the impact of Amazon’s HQ2 announcement.

Key Dates

On Saturday, November 3 the Washington Post broke news that Amazon HQ2 was in final discussions with Crystal City and by Monday, November 5, the impact on property values was all over the national news. Late on Monday, November 12, the Wall Street Journal reported the decision was final, and the next day, it was confirmed by Amazon.

Top Three Takeaways

  1. Massive Loss of Inventory:From the time the Washington Post broke the news on November 3 until now, the amount of homes to go under contract increased by nearly 17% from the same period over the last four years.The amount of new inventory to hit the market during that time decreased nearly 25%. The result being a net loss of 157 homes available for sale during a time when we usually have a net gain in inventory due to lower demand.
  2. No Time To Wait: 30% of homes listed since November 3 went under contract in five days or less. Of the 410 homes listed for sale since November 3 that are under contract or closed, they averaged just 17.5 days on market which is 3x faster than the average time properties spent on the market the rest of 2018.
  3. Prices Are… Down?: In order to draw a high level of confidence in a data set, data scientists generally recommend collecting at least 30 samples.With 350 sales (samples) of Arlington homes having gone under contract since November 3, you’d think that I’d be confident in the conclusion highlighted in the data set below which shows a decrease in the average sold price of Arlington homes that went under contract from November 3 to January 28.

This is a perfect example of data not correlating to reality and a good time to stress the importance of not using one or two data readings, especially average sold price, to drive your decision-making on a purchase or sale.

The reason average prices are down over this period isn’t because the Amazon announcement or because historically low supply and historically fast sales are magically making real estate less expensive.

It’s simply because we’ve had a higher volume of less expensive real estate sell during that period, thanks to a spike in investor activity since the announcement.

I can assure you that based on what my clients, both buyers and sellers, are experiencing in the market over the last three months that prices are up and competition is fierce in Arlington and the surrounding Northern Virginia communities.

The big question heading into the spring, which usually brings out the strongest buyer demand, is whether or not we will see a spike in new inventory coming to market from owners seeking to take advantage of low inventory or whether new inventory will remain at historically low levels because as owners hold out for potentially larger returns once Amazon starts hiring.

Look out for an inventory progress report from me in a few months!

If you are planning to buy or sell in 2019 and want an in-depth analysis of how Amazon HQ2 and the current market conditions will impact you, don’t hesitate to reach out to me at [email protected].

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Arlington 2018 Real Estate Review — Part 3 of 4

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: How did the Arlington real estate market perform in 2018 and what do you expect in 2019?

Answer: Over the last two weeks I reviewed how the detached single-family market and condo market fared in 2018 and this week we’ll take a look at the 2018 performance of Arlington’s townhouse and duplex market. Next week we’ll close out the four-part series with a detailed look into the data following Amazon’s HQ2 announcement.

Limited Price Growth, Strong $/SQ. FT. Growth

With prices surging in the detached single-family market in 2018 and in the condo market during the first half of 2018, one would expect a spike in townhouse prices.

In reality, North Arlington prices increased by a meager .8% over 2017 and dropped by 3.9% in South Arlington for an overall 2.5% increase in the average net sold price of an Arlington townhouse/duplex. If we drill down a bit further into the data, it turns out that all of the growth occurred in the 2nd half of 2018 in North Arlington.

How does .8% growth and a 3.9% loss equal an overall 2.5% increase in pricing?

Fair question… it’s because the volume of more expensive North Arlington homes increased significantly from 2017, and the volume of South Arlington homes dropped significantly from 2017. This caused North Arlington’s .8% to contribute much more heavily in the overall pricing.

Sold price doesn’t tell the entire story though. When I looked at $/sq.ft. (using above-grade square footage, no basements), I saw a different story unfold in 2018 with 5.3% growth across Arlington — 4.9% in South Arlington and 2.2% in North Arlington.

Couple this data point with the fact that South Arlington townhomes sold three weeks faster than North Arlington’s in 2018 and South Arlington buyers negotiated .4% less off the original asking price than North Arlington buyers, I predict that the South Arlington townhouse market is poised for significant growth in 2019.

What’s the difference between what you get in North Arlington and South Arlington? Quite a lot when it comes to the townhouse market. The average North Arlington townhouse has 2,100 sq.ft. above-grade and was built in 1988 while the average South Arlington townhouse has just 1,250 sq. ft. and was built in 1960.

2018 Arlington Townhouse Market Highlights

  • The median net sold price increased by 2.6% to $546k.
  • The average buyer could only negotiate 1.2% off the original asking price, which is less than what condo and detached single-family buyers were able to negotiate last year.
  • The average 2 BR sold for $483k, the average 3 BR sold for $753k and the average 4 BR sold for $906k.
  • The 531 sales in 2018, two-thirds of which were in South Arlington, came in just below the 559 in 2017.
  • If you are looking for a townhouse built since 2000, be prepared to spend over $1M. The average net sold price in 2018 was just over $997k.

Inventory has been slowly trending downward over the last five years, but like everything else in Arlington, has reached an all-time low since the Amazon announcement.

Prior to December, the lowest average monthly inventory over the last five years had been 15 (Jan ’18) and 19 (Feb ’16) and December ’18 averaged just 10 homes available. As of January 21st there are 15 on the market.

Up next week… a similar look at the impact Amazon’s decision had on the Arlington market!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Arlington 2018 Real Estate Review — Part 2 of 4

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: How did the Arlington real estate market perform in 2018 and what do you expect in 2019?

Answer: Last week I discussed how the detached single-family home market fared in 2018 and this week we’ll take a look at the 2018 performance of Arlington’s condo market. Next week we’ll review the townhouse market and finish up with a detailed look into the sales data following Amazon’s HQ2 announcement.

In Like a Lion, Out Like a Lamb

2018 was a tale of two markets for Arlington condos. In July, I wrote about how well the condo market was doing for the first time in years, boasting ~10% growth from 2017. However, the net sold price in the second half of the year dropped by ~8.5% resulting in cumulative appreciation of a respectable 3.7% for the entire year.

Most of the growth can be attributed to two-bedroom condos (6%), with very little growth in the one-bedroom market (1%) and losses in the three-bedroom market (-2.5%). While this may not seem like much, Arlington had zero growth in the overall condo market since 2014.

Expect prices to continue to rise in 2019 as inventory continues to drop. Q4 2018 was the 11th straight quarter of year-over-year decline in condo inventory and by far the largest drop thanks to Amazon.

The total number of sales increased slightly in 2018 to 1,276 and the total cost of all of the condo sales topped $555M. The least expensive unit sold in 2018 was a 1 BR/1 BA 610 sq.ft. condo in Southwest Arlington for $115,000… that’s a great deal!

The most expensive unit sold in 2018 was a 3 BR/3.5 BA, 3,045 sq. ft. condo at Turnberry Tower in Rosslyn for $3,050,000. If you missed out on the Turnberry sale, not to worry, there’s a 3 BR/4.5 BA with nearly 4,500 sq. ft. on the top floor currently available for $5.2M.

2018 Arlington Condo Market Highlights

  • Median net sold price increased 5% to $380,000.
  • The average studio (no legal bedroom) sold for $230,000, the average one-bedroom sold for $340,000, the average two-bedroom sold for $504,000 and the average three-bedroom sold for $810,000.
  • 2018 was the 5th year in a row that buyers lost leverage in negotiations, with buyers able to negotiate an average of just 2.3% off the original asking price in 2018 compared to 2.8% last year. 29% of buyers paid at or above the asking price.
  • The average condo sold for a net $442/sq. ft. The most expensive zip codes by square foot are 22209 ($557/sq. ft.) and 22201 ($528/sq. ft.) which represents the Rosslyn-Ballston Corridor. The least expensive zip code by a wide margin is 22204 at just $276/sq. ft. 22204 encompasses Columbia Pike and the bordering neighborhoods (hint hint… investors).
  • The pace of the market continued to increase with average days to contract dropping 12%, proceeding a 16% drop in 2017.
  • The average condo sold was built in 1981.
  • The average one-bedroom was 772 sq. ft., the average two-bedroom was 1,126 sq. ft., and the average three-bedroom was 1,751 sq. ft.

What To Expect In 2019

Pricing Breakthrough — Despite the slowdown in the second half of 2018, I wouldn’t be surprised to see Arlington-wide appreciation of at least 5% in 2019.

Key market indicators like increasing pace of sales, declining buyer negotiation leverage and decreasing supply have consistently trended in favors of sellers over the last 2-3 years, but with limited price growth. I think 2019 is the year that prices react accordingly.

Investor Activity — The Amazon announcement brought a wave of local, out-of-state and international investors into the market. I expect there to be significant appreciation in 2019 in zip codes with the lowest $/sq. ft. like 22204, 22207 and 22206.

Historically Low Inventory — Over the last five years, the lowest average inventory in a month was 169 condos and cooperatives (coops). On the heels of Amazon’s announcement, December averaged 100 condos and coops for sale and as of Jan. 14 2018 there were 101 for sale.

If you remove coops and age-restricted housing from the mix, that number drops to 61 units for sale. Will owners take advantage of the low inventory and go to market with higher prices or will they wait for the Amazon-effect to take shape before selling?

New Construction — Two new construction buildings, Trafalgar Flats and Pierce Court, will finish sales and deliver in 2019. Three new construction buildings will open sales in 2019; 2000 Clarendon, an unnamed project in Ballston at 11th and Vermont and a project similar to Pierce Court are just around the corner.

Time To Update — Many of the condos along the Rosslyn-Ballston Corridor are 10-15 years old and selling with their original finishes (same floors, appliances, countertops and bathrooms) which are losing their appeal to today’s buyers.

The return on investment owners can get from making strategic updates to finishes is increasing and a great way to standout from competition, albeit limited competition.

Up next week… a similar look at the Arlington townhouse market!

If you are buying or selling a home in or around Arlington in 2019 and would like to talk further about your strategy, you can send me an email at [email protected] to schedule a meeting.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Arlington 2018 Real Estate Review – Part 1 of 4

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: How did the Arlington real estate market perform in 2018 and what do you expect in 2019?

Answer: Happy 2019! Before 2018 is too far in our rearview, I’d like to update you on how the market performed in 2018 and what you can expect going forward in 2019. This week will focus on detached single-family homes.

Next week we’ll take a look at the condo and townhouse market, then conclude with a deep analysis of sales activity following the Amazon HQ2 announcement. If you’re here for fancy graphics, I’m sorry to disappoint… good data will have to do.

Happy Owners, Frustrated Buyers… Again

2018 continued the strong appreciation in the detached single-family housing market we saw in 2017, with 4.6% appreciation following last year’s 4.5% growth. Growth in 22203 (15.4%) and 22201 (11%) led the way. Unlike 2017, which added inventory year-over-year (YoY), we’re in the 5th straight quarter of YoY inventory loss with an average YoY quarterly decline of roughly 20% in 2018… brutal.

There was a drop in total sales this year from 2017’s high of 1,153 to a five-year low of 1,041. The drop, in my opinion, has nothing to do with lack of demand, rather frustrated buyers not finding what they want and/or what they want getting too expensive (I’ve got a few clients nodding along).

The prices below represent net sold price calculated by subtracting any seller-paid closing cost credits against the sold price. 22206 and 22213 have relatively few sales, so averages aren’t reliable and I removed 22209 (two detached sales).

Real Estate Highlights from 2018

  • Median net sold price increased 3.5% to $890,000 after last year’s 5% growth
  • Buyers had a harder time negotiating in 2018, paying .4% more relative to the original asking price than last year. 40.7% of homes sold for at or above the original asking price.
  • Median days on market remained almost unchanged from previous years, sitting at 49 days in 2018. 36% of homes sold within their first week on the market.
  • New construction sales dropped for the first time in years from 129 in 2017 to 87 in 2018. It’s the first time new home sales have been below 100 since 2013. I’ve been saying for a couple of years now that I think buyers are tiring of the same designs in new construction and builders who deliver some variation will reap the benefits. Note: the MLS captures a majority of new home sales, but not all of them.
  • The average detached home sold in 2018 was built in 1959, which is in-line with historical trends. It’s likely that this stat will remain about the same until more of Arlington’s Baby Boomers decide to downsize/relocate and free up more 1970s-1990s housing.
  • On average, a home in Arlington has 4 BR/3.5 BA over 3,000 sq. ft. on .20 acres of land

What to Expect in 2019

Building Price Momentum — A majority of the YoY price growth in 2018 occurred in Q3 (13.3% YoY) and Q4 (8.6% YoY). Hold on tight, as of 12 p.m. on January 7, 29 homes had already gone under contract this month.

Historically Low Housing Inventory — Over the last five years, Arlington has averaged 145 detached homes for sale in January and never had a month that averages below 100 homes for sale in 10+ years. There are currently 84 detached homes for sale in Arlington and only 13 of them are under $1M, but don’t worry friends, 22 of them are over $2M!

Leveling Interest Rates — Many buyers hesitated in 2018 due to rapidly increasing rates and it held pricing back. Buyers will start to adjust to these rates in 2019 and the Fed is expected to increase their rate twice this year, after doing so four times in 2018. A more stable interest rate will likely give buyers more confidence to purchase.

Amazon — A big question is how both buyers and sellers will react to Amazon HQ2 coming to Arlington. Based on what I’m seeing in the market and what I’m hearing from clients and colleagues, buyers will be more comfortable increasing their budget or paying above past sales with the security of (probable) future mid-long term growth.

On the other hand, quite a few would-be sellers are finding ways to hold onto properties for a bit longer which will exacerbate our housing inventory problems.

Up next week… a similar look at the Arlington condo market!

If you are buying or selling a home in or around Arlington in 2019 and would like to talk further about your strategy, you can send me an email at [email protected] to schedule a meeting.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

 Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Data Suggests You’re Searching For a House Today

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I partied too hard last night and am nursing my hangover searching for homes online. Am I alone in my misery?

Answer: Congratulations, you are among the millions of Americans who choose to nurse their New Year’s Eve hangover by searching for homes online. In fact, New Year’s Day ranks among the top three most active days for people to search for a home online, along with July 6 and the weekend after Thanksgiving. Conversely, these tend to be some of the slowest days/weeks for showings and offers.

If you’re searching for homes today, chances are you’re using one of the Big Three — Zillow, Trulia or Realtor (Yahoo Homes is ranked as third most traffic, but I’ve never heard of somebody using it and couldn’t find it online).

For years I told clients that these third-party sites were their best bet for search because our MLS failed to deliver a good client-side search experience compared to what was being offered by other sites.

However, earlier this year MRIS went through a merger and rebranded to BRIGHT MLS and finally created a respectable client-side search portal that gives buyers access to more search fields, a much better user interface, and better collaboration tools with their Agent. A major advantage of searching through the MLS is you have real-time, accurate new listing alerts, status changes and price reductions.

Check out this short YouTube video highlighting some of the new features and tools of the client portal.

I hope everybody had a great 2018 and wishing you all an even better 2019. Happy (online) house hunting to many of you today. If you’d like me to get you set-up with a BRIGHT MLS search portal send me an email to [email protected] and I’ll be happy to add you.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Three Biggest Home Buyer Mistakes

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: What are some of the most common mistakes people make when buying a home?

Answer: Hope you had a Merry Christmas! I’m assuming very few people will read my column this week so I figured it was a good time to sneak in some click-bait so I can pick-up some future readers 🙂

Please don’t throw tomatoes or broken Christmas tree ornaments, I’ll get back to my normal columns on January 8 with a deep dive into how the market performed in 2018. Without further ado, here are the three biggest mistakes I see people make when buying a home:

Mistake #1: Meet Me At [Insert Address] in 60 Minutes

Buying a house should not be like ordering an Uber across town. Just because you can “order” a real estate agent online to meet you at a house in 60 minutes doesn’t mean you should… and you really shouldn’t.

If you want to set yourself up for the best results, you should expect the process to start like any professional relationship; with an introductory meeting to discuss your needs, review the process, establish a strategy and vet the professional you’re working with.

Mistake #2: A Good Deal Isn’t Just About Negotiations

People are programed to think that by negotiating a seller down from their asking price, they’ve secured a good deal. Good deals come in all shapes and sizes and shouldn’t be defined by the seller’s asking price, but by whether or not you are getting value relative to the market and your needs.

I come across plenty of properties that are underpriced or fairly priced and buyers who are solely focused on negotiating a discount often lose out on what would be a great deal without negotiating. Similarly, I’ve seen plenty of sellers overprice homes by so much that buyers negotiate 5% off and still over pay, but they walk away feeling like a winner.

Don’t let a seller’s price dictate what is or is not a good value. Put yourself in a position to recognize value and move with confidence when you find it.

Mistake #3: Duped by Lenders

It’s easy to shop for interest rates online, but what you see online is often very far from what you get. Here are a few tips when shopping lender rates:

  • Go through their pre-qualification process first
  • Compare rates for a specific property (rates may change based on loan amount, property type, and location)
  • Compare rates on the same day
  • Compare the Annual Percentage Rate (APR) not the interest rate. A lender may artificially reduce an interest rate by tacking on up-front costs and these costs will be captured by a higher APR even though the interest rate is lower.

Merry Christmas and Happy New Year to everybody. I’ll see ya in 2019!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: What Does Contingent Mean When Buying a Home?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Admittedly, I thought I would be more successful learning about the home-buying process online, but realizing it’s difficult to get clear answers that apply locally. I’m getting confused about the meaning and impact of a contingency and hoping you can explain what contingent means and what I should know about contingent contracts in this area.

Answer: There are plenty of educational resources online about buying a home, but local customs and contracts differ so much by state or region that a great explanation of a topic by an agent in New York may prove to be misleading for a home-buyer in Northern Virginia.

I always recommend that our clients spend some time up-front with us discussing key milestones and contract protocol. You’d be surprised how much even the most seasoned buyers can learn during a 30-60 minute review of the buying process.

Simple Definition

Contingencies, in a real estate transaction, are clauses or addendums added to the Purchase Agreement that give one party the right to cancel or renegotiate the contract if certain things do or do not happen within a pre-determined period of time.

Nearly every contingency you will need is a pre-written form offered by the local Realtors Association (e.g Northern Virginia Association of Realtors) so you don’t have to worry about hiring an attorney to draft the language unless you find yourself in an unusual situation.

If a Buyer cancels the sale within the legal limits of a contingency, they receive a 100% return of their deposit/escrow (Earnest Money Deposit).

The Big Three

There are three standard contingencies used in almost every sale — Home Inspection Contingency, Financing Contingency and Appraisal Contingency.

Like most contingencies, they protect the Buyer. However, they are not required so Buyers may decide to remove some or all of their contingencies in order to improve the strength of their offer. Fewer contingencies equals fewer barriers to sale which is more attractive to a seller.

Home Inspection Contingency — This provides buyers the right to hire a 3rd party home inspector (your Agent should be able to recommend somebody), followed by the buyer’s right to negotiate for repairs and/or credits from the seller and/or the ability to void the contract if an agreement on repairs/credits can’t be reached.

Buyers may elect for a Pass/Fail Contingency which eliminates their right to negotiate repairs/credits, but leaves intact the right to void. Nobody other than the buyer can decide whether a home passes or fails inspection.

The Inspection Contingency Addendum also includes a section for Radon testing, which is applicable when a home has a livable underground basement.

Financing Contingency — A Financing Contingency protects the buyer in the event that they are unable to secure a loan to purchase the home. If a buyer is rejected from their loan application for any reason other than personally sabotaging the loan (e.g. not delivering required documents), they have the right to void the contract.

This is why it is important for sellers to vet their buyer’s pre-approval letter before accepting an offer to make sure they have been fully qualified by a reputable lender. Your Agent should know how to vet the approval and whether there are any red flags.

Appraisal Contingency — If you are taking out a loan to purchase your home, the lender will most likely require a 3rd party appraisal. The Appraisal Contingency protects buyers in the event the appraised value is less than the purchase price.

It allows the buyer to renegotiate the purchase price, add more equity to the loan to maintain their down payment percentage, leave the equity unchanged and reduce the down payment percentage or void the contract.

Other Contingencies

Other less common contingencies include the Association Document Review, which offers Buyers a non-negotiable three-day review period any time they purchase a home in an Association (Condo, Coop, HOA, POA) to review the Resale Package which includes documents like by-laws, rules, budget and reserve study. Upon delivery, Buyers are able to cancel the contract for any reason within three days of receipt.

Another less common contingency relates to the purchase or sale of another home. Sellers may include a contingency that states they must find a home to purchase before they will sell their current home and buyers may include a contingency that requires them to sell their home before they purchase their next home.

Proper Use

After purchase price, contingencies are the next most important terms in a negotiation. You should spend time early in your buying process talking with your Agent about the most efficient use of contingencies to maximize your protection while not unnecessarily compromising the strength of your offer.

This is especially important if you are making an offer on a home that has been on the market for less than two weeks and there is a chance for multiple offers. The winning offer is not always the highest price, but the one who presents the best overall contract. Even in non-competing offers, you may save yourself money on the final purchase price by using contingencies and other terms more efficiently.

As always, if you would like to set-up time to discuss this topic in more detail, don’t hesitate to email me at [email protected] to schedule a meeting. Now go finish up your holiday shopping!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: How Much Seller-Paid Closing Costs Can I Negotiate?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Is it realistic to expect a seller to pay all of my closing costs?

Answer: Over the last 18 months, Arlington sellers have paid for a buyer’s full closing costs in less than 4% of transactions. In May, I wrote a column explaining that in a standard transaction with a mortgage, buyers are responsible for paying about 2.5-3% of the purchase price in closing costs (reference the article for a breakdown of what is included).

Closing Cost Assistance vs Repair Credits

Seller contributions towards closing costs are often referred to as Seller Credits or Seller Concessions and serve to reduce the amount of cash a buyer needs to put up at settlement. If a seller offers a credit for a broken washing machine, painting or something that comes up during the home inspection, that credit falls into the same bucket of money.

In other words, regardless of whether the money was negotiated under the pretense of closing cost assistance, repairs, updates or a combination of the three, it is all considered a Seller Credit/Concession and deducted as one lump sum against closing costs at settlement.

Lender Limits

In some cases, lenders limit the amount of closing costs a seller can pay for (e.g. investor loans), but most of the time buyers can try to negotiate for the seller to pay up to 100% of those costs and sometimes more than 100%.

You should always ask your lender to confirm how much seller credit you can negotiate because if you negotiate for a 4% seller credit, but are capped at 2%, you may end up losing out on the extra 2% you negotiated for.

The Data

Let’s take a look at how much Seller Credit Arlington buyers have been able to negotiate over the last 18 months. Note that there is no way of knowing whether the credits were offered up-front by the seller as incentive, negotiated during the initial offer negotiations and/or as a result of defects found during the home inspection.

  • On average, buyers negotiate Seller Credits worth .4% of the purchase price or just over $2,000 per transactions
  • 5% of transactions did not include any Seller Credits
  • Buyers negotiated a Seller Credit worth 2.5% or more of the purchase price in just 3.8% of transactions

The higher the purchase price, the less likely buyers are to negotiate a Seller Credit. There is a huge drop-off in average negotiated Seller Credit on homes worth over $500,000.

If you have a limited savings and require the seller to pay some or all of your closing costs in order to comfortably purchase the home you want, it’s important to discuss that early on with your real estate agent and build it into your purchase strategy.

If you don’t create an appropriate strategy around closing cost assistance, you may find yourself wasting a lot of time during the search process and losing out on multiple offers. If you ever want to discuss a purchase strategy, send me an email at [email protected] to schedule some time to talk.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Remodeling for Resale vs. Personal Taste

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I am interested in remodeling my home to better suit my family’s current lifestyle. How much should I consider resale value over our personal preferences?

Answer: I often say that the best way to ensure your home is a good investment is to find one that will suit you for a long time. Market appreciation and local development are never guaranteed, but eliminating one or two real estate transactions from your lifetime is a guaranteed way to generate value.

This is why many homeowners take on major remodeling projects instead of moving to a new home. Major remodeling projects often cost well into the six-figures so homeowners rightly question resale value.

To provide an insider’s opinion, I reached out to Caroline Goree, a Project Leader with BOWA, a local design build firm that specializes in luxury renovations from kitchens to whole-home remodels.

In Caroline’s role, she works almost daily with her clients from the design consultation through construction so she is intimately familiar with the challenges homeowners face when choosing between resale value and personal preference. The following is courtesy of Caroline:

Renovation Expert Advice

As a Project Leader, I am part of the remodeling process from beginning to end and there almost always comes a point during the design phase when clients ask “Will I ever get a return on my investment?”

How often do you buy a new pair of shoes or new tech and consider its return on investment? Taking on a major renovation allows you to stay in your neighborhood, extend the time you live in your home and customize to your lifestyle.

Some of these bonuses won’t show up in a financial model, so it’s important to remember that return on investment can be about more than money (like the one year old iPhone you just replaced with a newer iPhone).

Does Quality Pay?

“Buy well, cry once.” Getting value out of your renovation isn’t just about purchase price and resale potential. Appliances and other systems (HVAC, windows, roofing, etc.) vary greatly in maintenance costs, life expectancy, energy usage and more. Spending more up-front on design consultation and materials often pays off in the long run.

If maximizing resale value is more important than personal preference, talk with your Realtor about the appropriate level of finish for your home that will maximize your return on investment. I typically use appliance packages as an example.

You can purchase a GE Electric Range from Home Depot for under $1,000 or a custom built La Cornue for $25,000. Clients who choose the La Cornue are making a personal choice and should not expect to recoup much of the cost on resale, save the ultra-luxury market. Similarly, choosing a sub-$1,000 range in a $1M+ home is likely to hurt resale value by more than $1,000.

Be Design Specific

In Matthew Frederick’s book “101 Things I Learned in Architecture School” he highlights what I believe is the backbone to a great renovation project, saying “Being nonspecific in an effort to appeal to everyone usually results in reaching no one. Designing in idea-specific ways will not limit the ways in which people use and understand your buildings; it will give them license to bring their own interpretations and idiosyncrasies to them.” Most homeowners and builders are scared of doing something different but, I believe that “the more specific a design idea is, the greater its appeal is likely to be.”

Click here to see an example of a recently completely BOWA kitchen that does not follow the “all white everything” trend that has taken over (dare I blame Chip and Joanna Gains?!), but is absolutely stunning and certain to attract the most discerning buyer… at a premium.

If you and your renovation partner spend the time creating a thoughtful design that is functional and tasteful, there will be other buyers down the road who are equally as passionate about it.

Eli’s Perspective

Caroline, thank you very much for your insight! I’ll add that your decisions don’t have to be 100% for personal enjoyment or 100% for resale, it can be a blended decision.

To help you prioritize, think about how long you’ll live in the home after the renovation. If it’s less than five years, resale should be a higher priority. If you’ll be there for another 12-15+ years, personalize away!

Remodeling.com conducts annual studies on the resale value of popular renovation projects. Their studies found that most projects return 50-80% of their value upon resale. HGTV would have you think otherwise…

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Why Is My Neighbor Mowing My Lawn?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: My neighbor is mowing a portion of the lawn I thought was mine, but my neighbor claims it is his. Is this something I can prove through my title work?

Answer: Clients often ask me whether or not they should purchase a property survey, which is optional, when they buy their home. I think that in almost every case it is worth the relatively small investment (usually about $300-$400 for a standard survey).

I was recently chatting with Liz Wasserman of Universal Title, one of a small group of excellent title companies in Northern Virginia (they also serve D.C. and Maryland) and one of the few I recommend to clients, and she shared a story with me about a client who did not order a survey and ended up incorrectly assuming that a section of land was theirs.

Given how frequently I am asked about ordering surveys, I thought it was a good opportunity for Liz to share the story and provide some reasons why it’s a good idea to order a survey when you buy a home.

Take it away Liz…

A new homeowner noticed a neighbor mowing part of her front lawn. When she asked the neighbor why he was mowing her lawn, the neighbor replied the property he was mowing belonged to him, even though the line of trees separating the two houses looked as if the property belonged to the new homeowner. She called her title agent and found out the neighbor was correct. “How can that be? Didn’t you search my property?”

Unfortunately, the new homeowner did not understand the difference between a title search and a survey and failed to purchase a survey. A title search confirms ownership of property, but it does not show the details of the property location.

A survey is a map of real property that shows where the property is located on the earth, the boundary lines of the property, the improvements on the land and access to the property.

FIVE GREAT REASONS TO PURCHASE A SURVEY

  • Undisclosed Rights and Easements: You may own your new home and its surrounding land, but someone else might have a right to use a portion of your property. A survey will show physical evidence of the rights of others to use your property for access, parking, utilities, and other situations.
  • Undiscovered Encroachments: A survey may be the only way to tell if a third party holds a claim to part of your property because their improvements such as a garage, fence, or swimming pool, are on your land.
  • House Built on Incorrect Lot: It may seem impossible, but sometimes a house is built on the wrong lot. A survey provides peace of mind by showing the exact location of the house you are buying.
  • Size of the Property: A survey shows the exact dimensions of the property’s boundary lines and how much land is included within those lines.
  • Adding on in the Future: Many residential platted lots have building restrictions known as setbacks which prohibit building anything within a certain distance from the boundary lines. If you are thinking of adding on in the future, a survey will help you determine if the property is right for both your current and future plans.

Liz, thank you very much for sharing this story and providing some good reasons for ordering a survey. I’d also like to add that you can order a survey at any time if you did not do so when you purchased.

If you are in need of a survey, planning to sell or purchase a home and would like to work with a great title company, or have title questions in general I highly recommend reaching out to Liz and her team of attorneys at Universal Title.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

 Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: The Amazon Impact — Part 1 of Many

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: What impact has Amazon’s announcement had on Arlington’s real estate market?

Answer: Wouldn’t it be funny if I wrote about something other than Amazon this week? I’ll come back to this topic every 4-8 weeks to provide an analysis on how Amazon’s decision (and probably Apple too) is changing our local real estate market by combining my normal data analysis with experiences of my clients and my colleagues around the D.C. metro area.

Key Data Following the Announcement

On Saturday, November 3 the Washington Post broke news that Amazon HQ2 was in final discussions with Crystal City and by Monday, November 5, the impact on property values was all over the national news.

Late on Monday, November 12, the Walls Street Journal reported the decision was final, and the next day, it was confirmed by Amazon. Let’s take a look at market activity in Arlington over the last two weeks since the news broke:

  • The November 3 WaPo announcement created the biggest surge with investors pouncing and owner-occupants accelerating their timelines. From November 4-12, 100 properties went under contract. Historically, about 200 properties have gone under contract the entire month of November.
  • Since the news became official the night of November 12, 46 more properties went under contract, for a total of nearly 150 properties under contract in a two-week period, surpassing the activity during the same period in previous years by over 50%.
  • I figured a lot of the increased activity would be in the condo market, but the percentage of contracts on condos is in-line with historical trends (about half of all contract activity)
  • While we won’t know how much the market is appreciating until these properties close (when purchase price is released) investors and owner-occupants seem willing to spend more.
    Historically, properties that have gone under contract in November averaged an asking price in the low $600’s and median asking price in low/mid $500’s. Properties under contract in the last two weeks averaged an asking price of $698,000 and median asking price of $625,000.
  • The surge in purchase activity has not been off-set with a surge in new inventory. We’ve had 89 properties listed for sale since the November 3 WaPo announcement, which is barely higher than the same period in prior years.
  • After removing age-restricted housing and the River Place Cooperative, there are less than 350 properties currently for sale and the average asking price of those properties skews abnormally high. The current average asking price is over $995,000 and median asking price is $812,500, compared with an average asking price in the mid $800’s and median price in the mid/upper $600’s historically during this time of year.

My Experience So Far

I knew we were in for a wild ride when buyers I was working with started running into multiple offers and escalations on properties that had been sitting for weeks/months.

Generally, the odds of running into multiple offers after a property has been on the market for a full week are slim, yet every one of the buyers I worked with on an offer in Northern VA over the last two weeks found themselves competing against at least one other very strong offer.

Another investor I’ve been working with ran into 11 competing offers on an old condo in northern Alexandria that normally would have sat on the market for a couple of months.

On the listing side, we’ve had people reaching out about properties that were already under contract and off the market (rarely happened previously). Remember the new 12-unit condo building near Rosslyn I wrote about on October 30? All six of the two-bedroom units are under contract at full price and with the six three-bedroom units almost finished, we expect those to move just as quickly.

From what I’ve gleaned from offers I’ve been part of and activity my colleagues have seen, there’s been an almost overnight increase of 2-5% on most properties in Arlington and northern Alexandria. It doesn’t seem like D.C. or outside the beltway in Northern Virginia is experiencing as notable of a bump, at least not yet.

What I’m Watching For

I am really interested in how the Amazon news fits in with the winter market we usually experience, highlighted by fewer homes listed for sale and slower buying activity.

December historically produces the fewest new properties for sale, by a wide margin, and also tends to offer buyers the best opportunity to negotiate bigger discounts, but I highly doubt this December will offer buyers much in the way of negotiating.

The big question is whether the Amazon news will push a higher number of home owners to sell and buck the low-inventory trend. If new inventory remains low as sellers prepare their homes for the spring market, I wouldn’t be surprised if home owners who make it to market in December/January walk away with significant returns. The pace of new inventory will be key.

I also doubt the purchase momentum will continue at this pace, but will be watching closely with interest. A lot of the activity over the last two weeks was driven by investors, but I suspect many who didn’t get under contract in the first two weeks will hesitate for fear of not getting in early enough (I’ve heard this from a few of my investor clients already).

While many investors will take a step back, I think owner-occupants will continue to be active in the market and willing to pay the new premium, knowing that there is still a much higher ceiling for appreciation over the length of their ownership.

If you are interested in testing the market as a buyer, seller, or investor and want to talk in more detail about your options, feel free to give me a call at 703-539-2529 or email me at [email protected]

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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Ask Eli: Department of Veterans Affairs (VA) Loans

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Are funding fees on VA loans eligible for seller credits?

Answer: Loans guaranteed by the Department of Veterans Affairs are known as VA Loans and provide current and former service members with an opportunity to purchase a home with as little as 0% down.

In addition to the normal closing costs (title fees, transfer taxes, etc.), a funding fee is charged at settlement, which is equal to anywhere from 1.25-3.3% of the loan amount, depending on size of down payment, type of service and whether or not it’s the borrower’s first time using the VA loan program.

It’s a fee paid to the VA on every loan to offset the cost of loans that default (similar to mortgage insurance on non-VA loans). Disabled veterans are eligible to have the entire fee waived.

In a previous column, I explained how buyers can negotiate for seller credits to reduce or eliminate the out-of-pocket expense of closing costs at settlement. Fortunately, the funding fee falls into this category, along with the rest of the standard closing costs associated with a VA loan, and buyers are eligible to have all of these costs covered by the seller.

In theory, if a buyer is able to negotiate 100% of closing costs paid by the seller and chooses a 0% down payment loan, a home can be purchased cash-free.

If you’re unable to negotiate seller credits to cover the funding fee and are concerned about having the cash to pay for closing costs, you’re also allowed to roll the funding fee into your mortgage so that it becomes part of your monthly payment.

Some Other Facts about VA Loans You May Not Know

  • Financing is available up to $1,500,000, just not at 0% down
  • You can use your VA entitlement more than once
  • VA loans are assumable (can transfer from seller to buyer at seller’s rates) which is a big deal in today’s market because rates have been increasing steadily
  • Adjustable Rate Mortgages (ARM’s) are also available, not just fixed-rate

Arlington Veterans Affairs (VA) Loans by the Numbers

  • In 2017, 261 of 3,130 buyers (8.3%) used a VA loan. By comparison, 2,173 used a Conventional loan (69.4%)
  • The average purchase price for homes purchased using a VA loan was just over $615,751
  • 38% of VA loans were used to purchase a condo, 29% to purchase a townhouse and 33% to purchase a single-family home
  • On average, buyers using a VA loan negotiated 2.3% off the original asking price. By comparison, buyers using a conventional loan negotiated 2.2% off the original asking price and cash buyers negotiated 4% off the original asking price

I hope the veterans and active duty military readers had a great Veterans Day Weekend. Thank you for your service!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

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